Surrender Value is more than maturity Value- can this be right? Help!

tingly

oh blimey, its all a bit of maize isnt it?

I will ring them today and get them to put the terminal bonus figures in writing.#Thanks for your replies so far, think i understand!

EdInvestor

dunstonh wrote: »

The charts show a fall because they are a rolling 25 years. The year from 25 years ago is replaced with last years. Returns were higher back then (mainly due to higher inflation rather than anything else). So, if you replace a 15% year with a 6% year the rolling 25 year figure will appear to go down.

It won't just appear to go down, it will actually go down.

You have to look at current potential

Indeed, and the potential is that you could get more by surrendering now than if you wait until next year when a bad year replaces a good year and the policy value goes down.There are no good years replacing bad years over the 25 year timescale.

The difference between unit linked and With-profits investments is that the former track the market on a daily basis, but the latter tend to change valuations only annually.Thus, if you get your timing right, you can profit from that.

dunstonh

It won't just appear to go down, it will actually go down.

No it wont because the person wasnt invested 25 years ago. They dont have a 25th year to drop off and be replaced with a new year.

In this case 1987 was the start year and thats 21 years ago. No year will drop off to be replaced with a new year. The returns will depend on the underlying performance of the fund in 2007 and anticipated returns of 2008.

1988/9 was a bad year so its quite possible that we will see a bad year being replaced with a good year next year. Again it doesnt matter to those that were not invested at that time.

tingly

Thankyou so much for your replies, its very kind of you to bother. I can see from your profiles that dunstonh seems to be an ifa, just out of interest , what do you do edinvestor?:T

there seems to be a bit of "non-alignment" between your two sets of opinions, and i am not sure i quite understand what your are saying in entirety,but if i'm getting it right, edinvestor seems to be saying that surrendering might be an idea, as things might get worse, whereas dunstonh seems to be saying that edinvestor may be mistaken and things could get better.

I know no one knows for certain , so if mystic meg is reading this board?!:rotfl:

dunstonh

what do you do edinvestor?:T

She is the anti-IFA

there seems to be a bit of "non-alignment" between your two sets of opinions

Not really. The difference is how we interpret the data on the table.

edinvestor seems to be saying that surrendering might be an idea, as things might get worse, whereas dunstonh seems to be saying that edinvestor may be mistaken and things could get better.

They could get worse, they could get better. There is also the impact on the surrender penalty to consider. We dont know what future returns will be. My point on the tables is that performance from 20 odd years ago has no impact on your future bonuses. Returns are based on current performance of the investments held in the with profits fund.

tingly

Gotcha dunstonh, thanks very much.

ps, think you secretly love edinvestor!!!

EdInvestor

Hi tingly

I'm a private investor. I calculate that if you surrendered the policy now and put the S/V on deposit at a net 5%, also paying in the premiums to maturity, you would get 126,606, (more if you took the TEP offer), so yes, you may as well take the money now.

What has happened with policies like yours is that the company has paid out far too much in guaranteed bonuses in the past.Thus your money will be invested largely in bonds to cover the guarantees.Because these old endowments have high charges and also pay tax on their gains, there's not a lot left to add on in the form of extra bonuses, as you've found.

Hence you would do better with cash as at least you'd save on the charges (and the life cover which may be unnecessary.)

My congratulations on being one of the few post- millenium winners in the endowment saga.